District Court Rules on Key Copyright and Computer Law Issues in Online Coupon Distribution Case

Last week, a district court in California ruled on several important copyright and computer law issues affecting the ability of software consumers to customize and modify programs on their personal computers. Two Samuelson Clinic students, Hari O’Connell and Domenic Ippolito, with help from Clinic faculty, Jennifer Lynch and Jason Schultz, filed an amicus brief in the case, on behalf of client Electronic Frontier Foundation (EFF), that was critical to the outcome of the ruling.

The case, Coupons Inc. v. Stottlemire, centers on claims by an online coupon distribution company against an accused “coupon hacker” for his discovery and publication of techniques that allow users of the company’s software to print additional coupons beyond the company’s intended limits. Specifically, Coupons, Inc. claimed that John Stottlemire’s actions violated two separate anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA) and also constituted violations of state-law protections against conversion and trespass on property rights.

The Clinic’s brief argued that Coupons’ DMCA claims threatened the public interest by blurring the Congressionally-delineated line between DMCA access controls and rights controls (which allow consumers to make fair uses of copyrighted materials including the software and coupons at issue) and by improperly extending the DMCA to prohibit protected speech, such as Stottlemire’s alleged public posting that disclosed how the software worked and where its weaknesses were. The brief also noted the dangers of allowing Coupons to claim property rights in a user’s computer running its software and in the printers and paper used to print the coupons. After the hearing (at which the Clinic students went head-to-head before the judge against Coupons’ attorneys), the Clinic filed a supplemental brief challenging Coupons’ claim that each of its coupons was individually copyrighted because of the lone addition of a unique bar code on the coupon.

In the court’s ruling it agreed with the Clinic and EFF that Coupons “impermissibly blurred” the distinction between its two DMCA claims and likely could not maintain both claims: if each coupon was, as Coupons argued, “unique” (because each had a different barcode), then it was hard to see how there could be a claim for improper copying. On the other hand, as Coupons’ software allowed all its customers access to two “copies” of each coupon, it was hard to see how Mr. Stottlemire’s actions created additional access to works that were already available in an unrestricted format. In the end, the Court dismissed the access-control claim with leave to amend, but also indicated the copy-control claim (based solely on the addition of a functional device on the coupon) was suspect and may not survive a later stage of the case. This is an important result for the case and for Mr. Stottlemire because, under the DMCA’s copy-control provision, pro-consumer uses of copyrighted material, such as fair uses, adaptations for the blind, library research, and other statutory exceptions to copyright, are expressly preserved.

The court also agreed with the Clinic and EFF that Coupons’ conversion claim was ill-founded. It held that the Copyright Act expressly preempted any conversation claims on copyrighted software or coupons and that any claim for “converting” the monetary value of a coupon, if such a claim existed at all, was held by the stores and manufacturers who originally issued the discount, not the plaintiff, who was only responsible for distributing it.

The Clinic will continue to track this case as it proceeds through fact discovery and trial.